Monday, September 15, 2008

“Washington Mutual had $143bn in insured deposits on June 30 - about three times the size of the deposit insurance fund, but less than half of its $307bn assets.”

Read it again. Think about it.

Washington Mutual (WM) will probably be dead by Friday. How will that work?

Deposit insurance system may face WaMu test: “Attention has focused on the danger presented by the failure of Lehman Brothers. But the failure of a commercial bank such as Washington Mutual can have systemic consequences if it threatens a run on other weak banks.

Washington Mutual - the sixth largest bank in the US - has lost more than a third of its market value recently as investors fear it lacks liquidity and capital to survive the credit crisis.

The failure of a bank its size would test the strength of the US deposit insurance system and its ability to maintain the confidence of the nation's savers.

The US Federal Insurance Deposit Corporation covers the first $100,000 in deposits held by each individual in a given bank. As of June 30, 64 per cent of the total $7,000bn deposits were insured in the US - a much larger proportion than in the UK at the time when Northern Rock. the commercial bank, failed.

Nonetheless, this still leaves $2,500bn in uninsured deposits. If a high-profile failure causes these uninsured deposits to shift abruptly in a flight to safety, it could be highly destabilising for the banking system.

The US could be forced to adopt a de facto blanket guarantee on all bank deposits, as the UK did on a temporary basis during the Northern Rock crisis.

There are other precedents. At the start of the Asian financial crisis in the 1990s, the International Monetary Fund opposed extending deposit guarantees. But the IMF soon changed tack and told crisis-hit countries to issue full guarantees.

A formal blanket guarantee in the US would require legislation. But under a 1991 law, the FDIC could seek a systemic risk exemption to cover all the deposits of a failing institution, subject to the approval of its board, a supermajority of the Federal Reserve governors, and the Treasury secretary in consultation with the president.

The FDIC has no desire to invoke this authority - which has never been used; would be unpopular with taxpayers; and would carry a cost in terms of moral hazard.

The FDIC is respected for its operational effectiveness. But its $45bn deposit insurance fund is underfunded according to its own guidelines, at 1.01 per cent of insured deposits.

The FDIC is preparing a capital replenishment plan that would involve raising premiums paid by banks.

But analysts fear it may have to draw on its $70bn Treasury credit lines. Alan Avery, a partner at Arnold and Porter, said a single failure - if big enough - "would cause the FDIC to immediately draw on the Treasury credit".

Washington Mutual had $143bn in insured deposits on June 30 - about three times the size of the deposit insurance fund, but less than half of its $307bn assets.”

50
comments:

If FDIC runs out of $$$ to cover bank failures, and taps the Tres, the USD is going to tank even further.

This is like any industry pop... like the telecom/dot.com boom. Lots and lots of consolidation and bankrupt companies.

But like it was said, the LEH failure dwarfs the worldcom implosion (for example) AND, even when the dot.com'ers were imploding, the financial backbone of the economy (banks, fed, tres) was (fairly) sound.

How Alan/Ben let people live $100K/year lives but with only $50K/year of earned income is beyond me?

People will now have to work harder, longer, etc...to pay it all back. Its like the entire country was high on credit. Now the US is going cold turkey....and all the pain associated with it.

There is actually no FDIC fund. The 'premiums' they collect are funneled directly into the treasury to be spent on roads, school lunches, bombs, etc. So every account that the FDIC has to make whole comes directly out of the treasury anyway, so while WaMu is a huge liability to the treasury, so is every other bank that is going to fail.

puma basketBlack is lubricious, can match, but young people don't want to match with brunetpuma femmes, can try even cardigan knitting coat will appear lively cap. Boys and girls, puma CATcan choose to choose self-cultivation

A study last yearnike tn, the author in the essay read NIKE , a reporter at the Shanghai headquarters in an interview, nike chaussuressee a pr in high school to read a league plans, employees interviewed told reporters in Beijing's streets, they children to interview, the children said, "truly understand them." tn chaussures These words, if the author touches product function, brand spirit and culture is to become part of the consumer of two basic methods

mens clothing men's sweate, cheapcolumbia jackets, lacoste sweater, ralph lauren polo shirts,ski clothing. Free Shipping, PayPal Payment. Enjoy your shopping experience on mensclothingstore.Usnike max shoes, one of the world's three major brands of Puma shoes, will build its factory in Lanshan county next year, Hunan province. Taiwan Diamond Group of Footwear production chooses its base in Lanshan county, which is one of top 500 companies in the world.

Your article is very good.I like it very much.Once upon a time, there was a mouse father.He wanted to marry his daughter to the greatest person in the world.But, who was the greatest person in the world?Oh! puma ferrari shoescheap nike shoesThe sun! He must be the greatest person in the world.The mouse father went to talk to the sun."Hello! Mr. Sun. puma shoesferrari shoesI know you are the greatest person in the world.Would you marry my daughter?""What? I'm not the greatest person in the world. The greatest person is the cloud.If he comes out, I’ll be covered."nike shox nzUgg BootsThe mouse father went to talk to the cloud. “Hello! Mr. Cloud. I know you are the greatest person in the world. Would you marry my daughter?” nike 360 air maxnike shox shoes“What? I’m not the greatest person in the world. The greatest person is the wind.If he comes out, I’ll be blown away.”cheap puma shoespuma drift catThe mouse father went to talk to the wind. “Hello! Mr. Wind. I know you are the greatest person in the world.Would you marry my daughter?” “What? I’m not the greatest person in the world. The greatest person is the wall. If he comes out, I’ll be stopped.”cheap nike shoxnike air max 360The mouse father went to talk to the wall. “Hello! Mr. Wall. I know you are the greatest person in the world. Would you marry my daughter?” “What? I’m not the greatest person in the world. The greatest person is YOU, the mouse.” “The greatest person in the world is … mouse?” “Yes, the greatest person in the world is mouse. See? If mouse comes out, I’ll be bit!” nike air maxpumas shoesThe mouse father was very happy. He finally knew mouse was the greatest person in the world. He would marry his daughter to the handsome mouse next door. cheap jeanscheap levis jeansed hardy jeans

Examine the soles of your shoes. Note where UGG Mini wear has occurred. Most people seem to be amazed that their shoes wear at the rear outer corner. Most UGG Mini boots rearfoot strikers will wear at this part of the shoe. The reason for this, which someday, somewhere a funded study will prove, is that for most heel strikers it is the point Mini ugg boots of first contact of the shoe with the ground. Most people walk and run with their feet slightly rotated from center. Runners, however, also have what is called a narrow base Mini uggs of gait. A narrow base of gait means that the feet contact close to the midline of your body. This creates additional varus (tilting in) of the limb. This results, for the rearfoot striker, in the first point hitting the ground being the outer corner of your shoe. Forefoot wear ugg 5854 may point to an individual who is a sprinter, runs fast, contacts the ground with the forefoot first or all of the above. Uneven forefoot wear may show where one metatarsal is plantarflexed relative to the others or where one metatarsal may be longer than the others. In the presence of significant forefoot wear, you are at risk of stress fractures.

A good compropmse mght be pandora online something your chikldren want, wich cheap pandora will also be usefdul for them & you. Last year, scooter for one of the pandora charm boys was a big hit as he cuild whistle down the street at him, then fold it & put it in the bag when pandora charms australia he juumped on the bus or want to go inside the shopping center ... Not bad for investment in accordance with $ 100.00. It saved me from going to take him with his bicycle many timse troughout the year. This Christmas does not maztter

The Louboutin 2011 is planned using the ladies. offered the fact that pumps was born, the ladies lifestyle turn into colorful. The christian Louboutin 2011 Pumpswill be the god's masterwork. Who invited the Christian Louboutin Wedges ? Seldom people knew, but I think each and every and every lady will be grateful for him. between the countless pumps,the Christian Louboutin Shoescould be probably the most exceptional ones. The stylish pattern, the delicate design all mold the ladies perfect leg profile. Flowers inside the spring of 2011 creeping, up from frizzy hair to outfits hold on to footwear, have experienced a brilliant up. on this type of the glamor, spring and summer time flowers now here. Romance is really a woman's mood, exquisite flowers just appropriate of expression within our gestures, the woman, how can we not adore the romantic temperament to make certain which they distributed the flowers do? 2011 flowers bloom will get satisfaction from numerous poses! The Christian Louboutin New Sandalsalso can adds the hright in the ladies, it hold shock toward short lady. especially the red-colored lone in the louboutin heels, beauty and sexy, different ladies are crazy. The red-colored sole, andChristian Louboutin Mensis a very distinctive design, its design reflects its style. You put on it, that means you have its style.the earliest attribute in the Louboutin Shoes sale stroe.http://www.sale-louboutin-shoes.us

The Ladies Moncler Outlet Online Long Down Coat Purple is really a professional well suited for lengthy fitness put on used waterproof fabric for comfort and waterproof sturdiness.Women Moncler Lengthy Lower Jacket not just has got the best material but additionally has got the fashionable and stylish design that offer best warmth performance.Putting on Moncler Jackets could make you look noble.The Moncler Online Lengthy Lower within our store would be the latest styles.To follow along with the style trend,you ought to have a number of Moncler Clothes within our wardrobe.Our store is the destination for top jackets.They’re 100% real with great discount now. So be quick to find the goods from your store.They’re nipping up now,the truly amazing discount Moncler jacket and free freight offered take place in a limeted time only.

After becoming one of the most popular Nike mercurial vapor on the professional field, new Nike mercurial vapor fg are now one of the most anticipated boot releases here on our Nike vapor soccer shoes online store! Once again, Nike have delivered with another new CTR that is sure to go down well. The Nike Football Cleats have earned an honourable reputation for delivering optimum comfort. Packed with all the original Maestri II technologies, Best Soccer Cleats that their boot lets you switch from the last line of defence to the first point of attack in a matter of seconds. The dampening pods remain the stand out feature on the Nike mercurial superfly and are a key asset in achieving the theory of cushioning the ball and applying more boot surface area. The Nike mercurial vapor has achieved numerous impressive performance reviews and with this exquisite new color-way these distinguished control Nike football boots are sure to go from strength to strength. And as Fabregas plays now in Barcelona, we have reasons to believe that CTR360 will do even better.

uggs clearance Stretch the bag a bit, and you may see the uniqueness of your sound of the leather, not a lot of, lest you damage the bag and you'll should pay out for it. Uggs Outlet If it even now contains the customer care card with its minimal of a few languages, attach to it, the higher. Typically it will begin with Italian followed by French, English, and Chinese ugg boots clearance. re

Disclaimer

The Financial Ninja is a collection of my thoughts and opinions about current economic and market conditions. These are not buy and sell recommendations. Use your head and do your own research. This is a forum to stimulate discussion and debate.

About Me

I started trading during the tech bubble when I was still in high school. My trading has financed my education and I have since completed a BA in Economics and an MBA with a concentration in Finance. I have worked as both a proprietary equity and fixed income derivatives trader.